The Crest of the Commonwealth of Australia Treasury Portfolio Ministers
Picture of Wayne Swan

Wayne Swan

Deputy Prime Minister and Treasurer

3 December 2007 - 27 June 2013

10 February 2012

Interview with Jon Faine

ABC Radio, Melbourne

SUBJECTS: Interest rates; Australian dollar; spreading the benefits of the mining boom; aluminium industry; leadership

FAINE:

Mr Swan, good morning to you.

TREASURER:

Good morning Jon.

FAINE:

Has a treasurer ever been so impotent in Australia in the face of international and other forces?

TREASURER:

Well, I certainly reject that characterisation. The fundamental strength in the Australian economy is shining through at the moment but what also shines through are the challenges we see in the international economy and you see it for example in the reduced prices for aluminium for example, which is impacting on that sector here. You also see the tension between the strength in our economy but it brings with it a far higher dollar and you see the stresses and strains that puts on sectors such as tourism and manufacturing.

FAINE:

But there's less that you can do isn't there? You've got less levers available to you than anyone in the past.

TREASURER:

No, we've used the levers in the past and we've used them to great effect. I mean the reason Australia now has an unemployment rate of 5.2 per cent is that we're successfully avoided recession in this country unlike most other developed economies because we took choices when it came to both fiscal policy and monetary policy, stimulated our economy and we are not living with the very high levels of unemployment and the destruction in communities that we see in so many other developed economies.

FAINE:

But the ANZ will make an announcement today about interest rates entirely independently of the Reserve Bank and in effect they are undermining your and the Reserve Bank's authority over the economy by so doing, are they not?

TREASURER:

Well, Jon well over 12 months ago I announced a package of reforms, competitive reforms in the banking sector which took into account that our banks are very strong, very profitable and we needed to get more competition into the sector. So by the end of this year we're going to see something like 1 million households in Australia with mortgages that will not have mortgage exit fees. So if Australians with a mortgage are not happy with their bank, they've now got the capacity to pack their bags, walk down the road and get a better deal. And let me tell you in terms of the average standard variable rate paid to the major four banks people can get better deals than that down the road right now so I think their customers will take all of that into account when they examine the decision which is taken by their bank whether it's the ANZ or any other bank.

FAINE:

And yet despite you and others spruiking this, and I remember Peter Costello making the same point years ago when he was in the position that you're in now. A tiny proportion of the market has gone away from the big banks. The ANZ yesterday quietly lifted...

TREASURER:

Sorry, that is not true. What we have seen in recent times is a massive expansion of loans in the credit unions sector and in the small banks sector. You want to talk about the previous government, the cash rate in Australia now is 4.25 per cent. Under Mr Costello when he left office it was 6.75 per cent. If you've got a $300,000 mortgage now you are paying $3,000 a year less than you were paying under Mr Costello.

FAINE:

The ANZ yesterday quietly lifted some of its rates and charges for new customers. Surely that's a hint of what's to come for existing customers even perhaps as early as today?

TREASURER:

Well, I'm not sure what they're going to do today but I just make the point again and I make it to all of your listeners and I've been making it all week, that we've got plenty of variety out there on offer. People are moving to other financial institutions. So if they're not happy with the behaviour of their financial institution they can go down the road. There's been plenty of other reforms put in place by this government to ensure that consumers get a better deal and it's a much more competitive market. I mean, I celebrate the fact that we have profitable banks but we need to have a competitive banking sector.

FAINE:

Alright, now there's nothing you can do about the high Australian dollar, is there? And yet at the same time there's a strong and persuasive argument that it is now too high and it looks as if it's going to stay too high for the rest of the economy to cope.

TREASURER:

Jon, let's just talk about that for a moment because the high Australian dollar tends to reflect in the first instance, the strength of the Australian economy. It reflects the fact that unemployment is at 5.2 per cent. It reflects the fact that there's a very big investment pipeline.

FAINE:

Yes, but it comes at a cost. There's nothing you can do about it though, is my point.

TREASURER:

It does come with stresses and strains and that's why a couple of budgets ago I announced a whole program of reforms to deal with the stresses placed on our economy given the pressures of the resources boom and what it would mean for the dollar. That's why, for example, we put in place the resource rent tax to give us the capacity to provide a very big tax cut to 2.7 million small businesses. That's being opposed by the Liberals. They want to give a tax cut…

FAINE:

A watered down resource rent tax, a shadow of its former self.

TREASURER:

Well, I don't accept that either.

FAINE:

Well, it is.

TREASURER:

I'm sorry, it's not.

FAINE:

There's just no argument. It's affecting fewer companies for less return.

TREASURER:

What it is going to do is to provide a revenue base to spread the opportunities of the resources boom right around this country. It's being opposed by the Liberal Party. They're quite happy to give a very big tax cut to Clive Palmer and Gina Rinehart and oppose a tax cut to 2.7 million small businesses – a very substantial one.

FAINE:

Kevin Rudd designed a super profits tax that would have made a difference and you all squibbed in the Labor Party. In fact you knifed him for it.

TREASURER:

Well, that's absolutely incorrect. The fact is we've got a very substantial resource rent tax that will bring great benefits to this country and enable us to give tax cuts to small business and to build up superannuation savings of millions of Australian workers and we need to get that savings pool up as well given all the stresses and strains that we see that come with the economic strength of our economy. But Jon, from day one we've said that we have a patchwork economy which flows from our strength and that's why we've been dealing with the auto industry, that's why we've been working to make sure we get tax reform in place, we get the skills base right because we recognised this a long time ago.

FAINE:

Alcoa yesterday, Joe Hockey joined me the Shadow Treasurer, and I pressed him on whether or not a future Abbott-led Coalition Government would financially support Alcoa with taxpayers money and he was unable to commit or answer in any specific way. Wayne Swan, will a Gillard Government assist Alcoa if necessary?

TREASURER:

Well, first of all we've got the Jobs and Competitiveness Program that we're putting in place at the moment which is very important and we are working with that industry as well as the auto industry to make sure that we get the settings right. But let me just take you through the aluminium industry…

FAINE:

So how far do you go? Is it a blank cheque you throw at these struggling industries?

TREASURER:

Well, we don't know yet. We are sitting down and talking to the industry and I'm not necessarily signing up for any cheque at all. What I'm saying is that we've got a global problem in this industry. The industry is saying it itself. The prices for aluminium are at record lows. What tends to happen when that goes on is that our dollar comes down. So they've got this challenge at the moment with low international prices, a surplus of product on the global market which reflects global economic weakness, while at the same time domestically what we've got is a higher dollar. That's the challenge we've got in that industry. When it comes to the auto industry there's a similar challenge. Our auto industry is competitive and productive but there's soft demand for autos globally. There's changes in the supply chain and we're certainly working with the auto industry because we understood a long time ago the need for partnership with particular sectors given the stresses and strains in the economy. Mr Hockey can't promise to do anything because yesterday he finally admitted there was a $70 billion crater in his budget bottom line before he even makes any additional commitments. I mean they have bungled this all week.

FAINE:

Yes.

TREASURER:

The Leader of the Opposition has walked away from the surplus commitment. The Finance Spokesman has. Now Mr Hockey has. They're simply all over the place and now we've got the bungle again today of the costings of the MRRT. I mean they are just completely incompetent.

FAINE:

Well, he might be right though on another issue. I asked him yesterday about subsidising struggling industries.

HOCKEY:

The challenge is – look the challenge is if you are…

FAINE:

The challenge is about economic credibility at the moment Joe Hockey.

HOCKEY:

If you are in the business of subsidising industries then what you are doing is distorting the market. Now sometimes in the national interest you should be supporting the market. I understand that but you need to be careful with taxpayers money.

FAINE:

So Wayne Swan, he might be wrong on other things but he's surely right on that.

TREASURER:

Well, it depends what you're doing and it depends if you've got a policy framework. We've got a clear policy framework in place for the auto industry which they want to destroy. They've said they want to take another $500 million out of what we're doing in terms of co-investment with the auto industry. So that's just an extraordinary bungle for him yet again. In terms of the aluminium industry, we're talking to the industry about what can be done and we will continue to have those discussions and what we'll do in the process is behave responsibly.

FAINE:

Have you had a preview or a sampler of what's coming up on Monday on ABC TV's Four Corners which is about Kevin Rudd and his rekindled ambition I understand.

TREASURER:

I'm not privy to what they do on Four Corners Jon. You might be, but I'm not.

FAINE:

Is it going to reignite tensions just a week after they simmered? Well they went off the boil and back onto simmering.

TREASURER:

Well, Jon, I can make this point and I made it all week and I made it last Sunday on Insiders that there's a lot of speculation, a lot of inaccurate comment, a lot of commentary and I never intend to add to it.

FAINE:

And yet it won't go away.

TREASURER:

Well, Jon, I haven't seen the program but what I'm going to do is get on with my job which is making sure we deal with these opportunities and challenges in our economy. We've got a strong economy but we've also got challenges which are posed by events in the international economy and that takes up every waking minute.

FAINE:

And yet it just doesn't go away.

TREASURER:

Well, Jon, I don't intend to add to it.

FAINE:

Alright, and overnight Lateline on ABC TV had some disturbing footage of cruelty at an abattoir in New South Wales which has led to its immediate closure and we have to wonder if we're going to go through another export crisis or another review as we did with Indonesia and live animal exports in the wake of these latest disclosures and secret film that's been released.

TREASURER:

Well, I certainly, I saw the footage last night as well. It was shocking and the authorities have acted as they should. That's why we have the laws in place but we'll have to wait to see what the authorities have got to say Jon.

FAINE:

Alright. I'm grateful to you for your time this morning and thank you for answering all of our questions.

TREASURER:

Good to be with you.